National

Virus support must be wound down: Morrison

By AAP Newswire

Scott Morrison insists coronavirus welfare payments must be wound down, despite multiple warnings the looming cuts will wipe billions of dollars from the economy.

The prime minister says pandemic-boosted JobSeeker unemployment benefits and JobKeeper wage subsidies cannot continue indefinitely.

"These things can't go off into the never never and they have to be wound down," he said on Thursday.

"We have to move on from them."

Both support payments will be reduced at the end of next week.

Australia's unemployment rate unexpectedly dropped to 6.8 per cent in August as business restrictions eased across most parts of the country.

But the "effective rate" of unemployment is said to be well above 10 per cent and more than one million people are still out of work.

Even still, the Morrison government plans to slash fortnightly JobSeeker benefits by $300 next week.

Temporary top-up payments will be scrapped altogether at the end of the year, leaving the unemployed on just $40 a day.

Treasury officials concede this will leave people with less money to spend.

"Clearly in and of itself that will take some income out of the economy - that is undisputed," Treasury deputy secretary Luke Yeaman told a Senate inquiry in Canberra.

But the department has not modelled how many people might be plunged into poverty.

More than $12.3 billion has been spent on coronavirus supplements for job seekers and other welfare recipients.

Analysis commissioned by the Australian Council of Social Service found cutting the top-up payments will cost the economy $31 billion and put 145,000 full-time jobs at risk.

Treasury also expects the number of people on JobKeeper subsidies to fall next week when some companies "graduate" from the scheme because their turnovers have improved.

Department officials also predict an uptick in the number of JobSeeker recipients.

This is because the JobKeeper scheme is being split in two, separating full-time from part-time workers.

Some part-time workers will then be able to apply for both JobSeeker and JobKeeper payments.

Almost $55 billion has been paid out in JobKeeper subsidies.

The McKell Institute has warned cutting the payments will strip almost $10 billion from the economy before Christmas.

The institute found 1.05 million part-time workers would have their $1500 fortnightly JobKeeper payments reduced to $750 from September 29.

Another 2.4 million full-time workers would have their payments cut to $1200.

The institute found the Commonwealth would spend $1.52 billion less on JobKeeper per fortnight than if the original rate remained, representing a $9.9 billion reduction in fiscal support by Christmas.

This is expected to put a big dent in consumer spending.

Labor has welcomed the drop in unemployment but fears workers and businesses will suffer if supports are slashed next week.

"I hope they don't look at these figures and think everything is fine and we can continue on our merry way cutting support," opposition employment spokesman Brendan O'Connor told reporters.

"It would be a mistake for the government to think that this is going to be the end of it."